"640 is the new 620" The content of the email explained that the credit crisis continues unabated. Decoded what this meant was that in order to get a prime rate, what one used to be able to accomplish with a 620 score, one would now need to be a bit stronger. While there are fewer lenders participating in subprime, these still exist, but with larger down payments and higher interest rates.
Today, you need at least a 640 credit score to qualify for FHA Insured Mortgage financing.
We see many credit reports with low credit scores (anything less than 620), and often many scores in the 500's. This is BAD credit. If you are one of the folks affected by this terrible economy, you have a low credit score and you have a dream of buying a home, here's some simple advice for you.
First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.
Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.
I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website. http://consumer-action.org/
Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE. http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm
The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.
The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.
Got two relevant things for you to read -- this is a blog excerpt from Bill Zielinski...
The FHA is introducing new guidelines on loan to value ratios and the minimum credit score required for FHA borrowers. As detailed in a Mortgagee Letter from the Department of Housing and Urban Development (HUD), the following credit requirements will apply for FHA borrowers, effective October 4, 2010.
* To be eligible for maximum financing, borrowers will need a minimum credit score of 580 or higher.
* Borrowers with a credit score between 500 and 579 will be limited to a loan to value of 90%. A sub 580 FICO credit score borrower will henceforth need to make a 10% minimum down payment on a purchase transaction.
* All borrowers with a credit score below 500 will not be eligible for FHA-insured mortgage financing.
HUDâ€™s newly introduced minimum credit score and loan to value requirements will apply to all single family loan programs, except for Reverse Mortgages (Home Equity Conversion Mortgages) and Hope for Homeowners.
The new credit requirements are not expected to dramatically change the number of FHA mortgage approvals. Most lenders had already imposed a minimum credit score requirement of 640 or higher for FHA borrowers. In limited cases, borrowers with scores between 620 and 639 could still obtain mortgage approval.
Many potential FHA borrowers with scores below 640 who cannot obtain mortgage approval may be left wondering why this is the case if the FHA has established a minimum score of only 580. The explanation for this is that the FHA does not make mortgage loans but rather insures FHA loans made by lenders. Despite the FHA insurance, banks do not have an iron clad protection from loss.
... rest of that blog at http://seekingalpha.com/article/223956-the-fha-s-new-minimum
And I wrote a 10 part blog called "Top 10 Credit Myths" which is good..
For more tips read my blog, Top 10 Credit Myths. Worth your time. Link below. Good luck Barbara!
Tye Caldwell Sr.
REALTORÂ® - Keller Wiliams Realty Augusta Partners
Sell or Buy with TYE
I have a great mini series on my blog about credit scoring. Check it out.
This is a very good question and we as real estate professionals are given varied answers at times from different lenders. My question to all of the realtors that are saying 580, what lender is accepting a 580 credit score? In the meantime Barbara, I have seen lenders requiring a 620 minimum score and I have not had one client turned down with this score yet. However, each lender may look at your credit differently. I have a variety of lenders I work with and am willing to put you in contact with one of your choice, because they are the experts in that area.
Thank you for your interest,
Janet Robinson------ Right Realtor, Right Time, Right Place, Robinson Right Way Home!
First time home buyers can be approved for loans with credit ratings in the high five hundreds to the seven hundreds. Obviously the higher your score the better your chances for a loan with a favorable interest rate. Lenders look at you as being less risk with a higher score and reward borrowers with better interest rates.
This question was just asked of a few lenders with whom I've recently worked. The answer was that they could still offer mortgages to borrowers with scores as low as 580, provided there are no recent bankrupcties, charge offs, etc. You would be wise to speak with one of them so that your specific needs can be addressed.
Meanwhile, please look over the blog at the link below for information on programs available in Georgia to first time home buyers to help them with their down payments (grants, loans, more) and home buyer education resources. Then call me for an initial confidential consultation so that we can help determine the right lender for your specific needs.
Please call me if there is anything else that you need.
REALTORÂ® / Consultant - Keller Williams Realty Atlanta Partners
The closer to 700, or better is where we should all shoot for. You will get your best rates. You can get a mortgage even in the 500 range, but your interest rates will be higher, and not all lenders will lend with low scores. If you ahev a large down payment, to off-set the risk of the lender, you might have a better chance of getting a decent rate if your scores are marginal. FHA loan do allow for lower than average scores and you can still go in with little down. You will need to have 3% into the deal..which can count closing costs, etc.. Some of those closing costs can actually be wrapped into the mortgage. If this is your senario, find a REALTOR and most important;y, a lender, that handles and is comfortable with FHA loans. If someone tells you they don't handle them, find someone else to help you. In NY State, we have state funded loans FOR first time buyers, Look into your State and see IF they have such programs. In NY, the interest rates are usually better than average, but funds are limited. If you need an agent to work with, I can easily refer you to someone in your community that is experienced and knowledgeable. Just let me know. There is no cost or obligation, just some help.